UPDATE 2-Croatia's Agrokor and creditors set to implement standstill agreement

Reuters Staff

3 Min Read

(Adds statements from bankers)

By Igor Ilic

ZAGREB, March 31 (Reuters) - Croatia’s heavily indebted food and retail group Agrokor and a board of creditors have agreed “in principle” on the main elements of a standstill agreement which they expect to sign later on Friday, Erste Bank said in a statement.

Agrokor, the largest private firm in Croatia and the biggest employer in the Balkans with around 60,000 workers, built up debts of about 45 billion kuna ($6.5 bln), or six times its equity, as it expanded rapidly.

The creditors include Russia’s Sberbank and VTB Bank and the Croatian units of Austria’s Erste Bank and Raiffeisenbank as well as Privredna Banka Zagreb, owned by Italy’s Intesa Sanpaolo, and Zagrebacka banka, owned by Italy’s UniCredit.

“The standstill agreement should ease Agrokor’s efforts to resolve its liquidity problems, secure continuation of its business, protect the value of the concern and lay the foundation for sustainable restructuring,” the statement said.

Christoph Schoefboeck from Erste Bank said the goal was primarily to enable Agrokor to meet its obligations towards suppliers and maintain its operations.

The company will get a chief restructuring officer and independent experts to fill top management roles, to make the process “transparent and sustainable,” the statement said.

The head of Croatia’s Sberbank unit Mario Henjak said the freeze on Agrokor’s debt repayments to banks would begin immediately.

“Standstill starts from today... There will be a new management heading the restructuring process, but we don’t know the names yet,” state news agency Hina quoted Henjak as saying.

He said that fresh funds would be injected in Agrokor, but declined to specify the amount.

On Friday the Croatian government also proposed a law aimed at shielding the economy and the financial system from big corporate failures. The law, yet to be approved by the parliament, will apply to firms with more than 5,000 employees and debts of at least 1 billion euros.

Prime Minister Andrej Plenkovic told a cabinet session the law would be activated only at the request of the company or its creditors. (Reporting by Igor Ilic; Editing by Ruth Pitchford)